The sole purpose test is designed to ensure that the SMSF is maintained for the purpose of providing benefits to members upon their retirement, or their dependents in the situation where a member dies before retirement. The trustee must comply with this test in order for the SMSF to be taxed concessionally.

The sole purpose test is divided into core and ancillary purposes. A SMSF must be maintained for at least one 'core purpose', OR for one or more of the core purposes and for one or more 'ancillary purposes'.

Core Purposes include:

1.    Paying benefits to members on or after retirement.

2.    Paying benefits to members once they reach a prescribed age.

3.    Paying benefits to members on or after death.

Ancillary Purposes include:

1.    Provision of benefits for each member on or after termination of employment.

2.    Provision of benefits for each member on the cessation of work.

3.    Provision of benefits for each member on or after death of a member after retirement.

4.    Provision of benefits for each member on or after death of a member after a prescribed age.

5.    Provision of such other benefits as permitted by the Australian Prudential Regulation Authority (APRA).